INTERNET providers will be barred from charging
online businesses for “fast lanes”—that is, giving priority to their
traffic—except for certain specialised services, such as videoconferencing or
telesurgery. They also must not block or slow traffic other than reasonably to
manage their networks, such as to avoid congestion.
This is the essence of a law the European
Parliament passed on October 27th, after months of argy-bargy with the EU’s
executive, the European Commission, and national governments. For those
unfamiliar with the debate over “network neutrality”, the principle of treating
all internet traffic equally, the rules may seem much the same as those
approved by America’s Federal Communications Commission (FCC) in February. But
although the wording is similar, the details vary enough that they may produce
a very different outcome—one that could further weaken Europe’s smallish online
industry.
To understand the differences it helps to
compare the telecoms markets on both sides of the Atlantic. America has big,
profitable fixed-line and mobile operators, such as AT&T, Comcast and
Verizon, which want to be free of regulation. They may not be very popular with
their customers, but competition between them is limited and they wield great
lobbying power. However, they have found their match in America’s internet
giants, including Google and Facebook, which have an interest in keeping
internet traffic untrammelled, and have formed a strong pact with the country’s
vocal internet-policy campaigners.
In Europe the balance of power between the two
industries is more uneven. Activists and politicians have pushed for stricter
net-neutrality rules, but they have not hooked up with the continent’s internet
industry, which anyway lacks political heft. In contrast, Europe’s telcos,
often former (and, in some cases, still partially) state-owned firms, have kept
a direct line to their respective governments. And they have two arguments in
particular that carry weight in national capitals and Brussels: looser
net-neutrality rules would allow them to introduce new services and make the
money they need to improve their networks; and such rules would also let them
charge America’s online firms for using their networks.
Unsurprisingly, then, Europe’s new rules have
bigger loopholes than America’s, even if the law just passed is much stricter
than the commission’s first proposals. America’s rules also allow “reasonable”
network management, for instance, but ban operators from discriminating against
certain types of service, such as video or file-sharing—which the EU’s law
allows. Similarly, American internet providers can offer specialised services,
but the FCC can intervene if it thinks they are using this exception to
undermine the spirit of net neutrality. In Europe the exception is so broad
that internet providers could bring in paid-for fast lanes simply by labelling
them as specialised services, reckons Barbara van Schewick of the Centre for
Internet and Society at Stanford University.
Although the differing small print of Europe’s
and America’s rules may not have dramatic effects in the short term, “there is
a reasonable chance that net neutrality in the EU in practice will be much
weaker than in the US,” write Stefan Heumann of the Stiftung Neue
Verantwortung, a think-tank in Berlin, and others in a recent report.
This is good news for fixed-line and mobile
operators, but is likely to hurt European internet startups because it creates
barriers to market entry, argues Mr Heumann. Online firms will face extra fees
for telecoms services and extra bureaucracy—no problem for the mostly American
firms that dominate the internet business, but unhelpful for smaller European
contenders. Or indeed American ones. Interestingly, an open letter expressing
concern about the loopholes, in the run-up to the European Parliament’s vote,
was signed by some smaller American online firms such as Etsy, Kickstarter and
Tumblr, though not Facebook or Google.
Much depends on how national regulators
interpret the new rules. Some countries have already passed stricter laws. The
Netherlands, for instance, bans “zero rating”, in which a mobile operator
strikes a deal with, say, Facebook, in which people’s use of the social network
on their phones does not count towards their monthly data allowance,
potentially discouraging them from switching to Facebook’s rivals. The EU’s new
law, in theory, allows this; in America the FCC says it will judge on a
case-by-case basis. If Europe ends up with a patchwork of local rules, that
will make it harder still for its online startups to gain scale. So much for
the commission’s grand talk of a “digital single market”.
That said, America’s new rules are also far from
set in stone. Republicans are still trying to stop the FCC from enforcing them.
Several of their presidential hopefuls have said they would get rid of them.
And in December a court in Washington, DC, will hear legal challenges against
them by telecoms firms. The rules of the digital roads will be in flux for the
foreseeable future, but in Europe toll booths, fast lanes and an assortment of
traffic signs are likely to be more frequent than in America.
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